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2015 (1) TMI 869 - AT - Income TaxProvision for loss on derivative contracts disallowed - speculative transaction - Held that:- Accounting Standard which is continuously adopted by an assessee can be superseded or modified by legislative intervention. However, but for such intervention or in cases falling under s. 145(3), the method of accounting undertaken by the assessee continuously is supreme. In the present batch of cases, there is no finding given by the AO on the correctness or completeness of the accounts of the assessee. Equally, there is no finding given by the AO stating that the assessee has not complied with the Accounting Standards. Thus we hold that, in the present case, the "loss" suffered by the assessee on account of the exchange difference as on the date of the balance sheet is an item of expenditure under s. 37(1) of the 1961 Act. In the case on hand there has been an existing contract with a binding obligation accrued against the assessee when it entered into for-ex forward contracts. The forward contracts are in respect of consideration for exports proceeds, which are revenue items. There is an actual contract for sale of merchandise. In this factual matrix, it is clear in our view that the transaction in question will not qualify to be called as speculative transaction. In view of the facts and circumstances of the case on hand, as discussed above, we hold that the provision for losses on derivative contracts is allowable as expenditure u/s 37. - Decided in favour of assessee. Disallowance u/s.14A - Held that:- Where the assessee has not earned any income exempt u/s. 10(38) of the Act, disallowance of expenditure u/s. 14A of the Act is not tenable. Thus we also hold that the disallowance of expenditure u/s. 14A of the Act is not tenable and therefore delete the disallowance of ₹ 7,34,975 made by the Assessing Officer. - Decided in favour of assessee. Recomputation of MAT Credit u/s.115JAA considering the enhanced income on account of the disallowance made in the order of assessment for Assessment Year 2008-09 - Held that:- It is settled principle that the provisions of section 115 of the Act is a separate code in itself and that the ‘book profits’ have to be computed as provided under that section. If the disallowances made are not as per the provisions of that section, then those cannot be considered in computing the book profits. The Assessing Officer is directed to examine and verify the disallowances made while computing the ‘book profits’ and allow credit in accordance with law. - Decided in favour of assessee for statistical purposes. Interest under section 234B - Held that:- The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter and we therefore uphold his action of charging the said interest. - Decided against assessee.
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